How Much Does Purchasing a Property Actually Cost?
When budgeting to purchase a new property, many buyers solely focus
on the listed purchase price or their mortgage loan amount.
However, the total cost of acquiring a home or investment property extends well beyond just that basic sale price figure. There are a number of upfront expenses that need to be accounted for to ensure you aren't blindsided financially.
At Investors Mortgage, we believe in fully educating our clients not just on loan options but all the comprehensive costs of buying real estate.
That way, you can go into the process with a realistic understanding of what you'll truly need to bring to the closing table to make your property dreams a reality.
So what kind of additional costs should you be prepared for? Here's a breakdown:
Lender Fees & Charges
Lenders charge various fees to process, approve, and originate your mortgage loan. These can add up to thousands of dollars beyond your down payment. Common lender fees include:
Application/Establishment Fees
Property Valuation/Appraisal Fees
Settlement/Discharge Fees
Mortgage Registration Fees
Your specific loan and purchase scenario will determine which of these and other potential lender fees you're responsible for. Be sure to carefully read your detailed loan estimates during the pre-approval process.
Government Taxes & Duties
One of the biggest extra cost buckets comes from the various taxes and duties levied by state and local governments. These include:
Stamp Duty on Property Transfers
Title Transfer Registration Fees
Mortgage Registration/Transfer Fees
Foreign Buyer/Investor Surcharges
Stamp duty charges can be particularly hefty, sometimes over 5% of the sale price in some states. Your closing costs can escalate rapidly depending on the assessed value of the property.
Legal Fees and Loan Documentation
You'll need to engage the services of property conveyancers or real estate attorneys to handle the legal paperwork involved in a property purchase. Fees will be incurred for services like:
Title Searches
Documentation Review
Settlement Attendance
You may also need to pay costs for loan documentation, potential document certifications, background checks, and other administrative items.
Home Inspections & Reports
It's highly advisable to have a professional pre-purchase inspection conducted by a licensed third-party. Their report will identify any structural defects, pest issues, maintenance needs or code violations ahead of finalizing the sale.
Other common inspections include:
Electrical or plumbing inspections
Building/renovation certifications
Strata reports (for units/apartments)
While optional, having these reports in hand prevents unpleasant surprises after closing that could cost you dearly down the line in repairs or liability issues.
Moving Costs
Often overlooked by buyers, the physical move itself into the new property comes with its own bucket of expenses related to:
Professional movers or truck rental
Packing supplies
Utility connections and deposits
Changing mail/address updates/mail redirection
Cleaning services
Renovations & Upgrades
If purchasing a fixer-upper or dated property that requires immediate renovations, factor those anticipated costs into your upfront budget for repairs, materials, labour, permits and more. Even if just making cosmetic upgrades, those initial design, purchasing and installation charges can quickly accumulate.
While every purchase scenario differs, it's generally advisable to budget an extra 5%-10% beyond the sale price to comfortably cover the various taxes, fees and auxiliary costs of acquiring a residential or investment property.
Of course, some of these upfront costs may be offset or assisted by government incentives, rebates or lender credits depending on your unique buyer circumstances. An experienced mortgage broker can help identify ways to strategically minimize your out-of-pocket burden while setting proper expectations.
Don't let hidden costs catch you off guard during the excitement of purchasing a property. Contact Investors Mortgage today, and one of our friendly experts will provide an accurate, transparent estimate of all the expenses involved in your scenario.
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